Pritzkers’ Superior Bank Is Closed by Regulators

Federal regulators Friday closed a Chicago-area thrift half-owned by the multibillionaire Pritzker family that has been battered by huge losses on loans to high-risk borrowers.

The failure of Superior Bank is expected to cost the federal insurance fund an estimated $500 million, according to banking experts who have reviewed its operations. It would be one of the costliest failures of a U.S. financial institution.

The Federal Deposit Insurance Corp. was appointed receiver of the federally insured thrift.

It will open for business Monday morning as Superior Federal FSB, a full-service savings bank under a new charter, the federal Office of Thrift Supervision said. The agency said that all depositors “will have immediate access to their insured funds” at all 18 of Superior’s offices in the Chicago metropolitan area and that loan operations will continue normally.

The FDIC also is providing a $1.5-billion line of credit to the new institution, which will be known commercially as New Superior.

Regulators found that Superior Bank, based in Oakbrook Terrace, Ill., had lost nearly all its assets and had engaged in poor lending practices, inadequate supervision of employees and poor record keeping.

The Pritzkers, who control the Hyatt Corp. hotel chain and have other real-estate and industrial holdings, are one of the nation’s wealthiest families and have been major contributors to the Democratic Party.

Responding to the FDIC’s announcement, Harold S. Handelsman, an attorney for the Pritzker Interests, said, “The Pritzker Interests are disappointed at the outcome and intend to cooperate with the regulators. The Pritzker Interests have been willing to make additional investments of more than $250 million in respect of Superior Bank, based on a viable . . . plan that would give the bank a fighting chance to survive.”

However, Handelsman said, the Pritzkers were passive investors who had little control over the management of the thrift and therefore were “not willing to pour money down a black hole of uncertain numbers and unknown losses.”

The Pritzkers’ partner in the thrift and its holding company, Coast-to-Coast Financial Corp., is New York developer Alvin Dworman.

Superior specializes in making high-interest home, auto and other loans to consumers with troubled credit histories who cannot qualify for better rates. Those borrowers often run into financial trouble in a slumping economy and may be unable to repay the loans, bringing losses for the bank or thrift.

Some community groups have criticized Superior for its lending practices, which they said targeted minorities and the poor.

The outgoing director of the Office of Thrift Supervision, President Clinton appointee Ellen Seidman, had regulatory responsibility for Superior.

The thrift was represented in dealings with the agency by former Comptroller of the Currency Eugene Ludwig, also a Clinton appointee, who oversaw nationally chartered banks until he left the government for the private sector. Both banking agencies are divisions of the Treasury Department.

Seidman, a special White House assistant for economic policy before Clinton named her to head the thrift agency in 1997, had her confirmation delayed at least in part by controversy over her role in Democratic fund-raising.

Superior, a mortgage and consumer lender with about $2.1 billion in assets, has struggled for more than 18 months. Thrift agency examiners expressed concern in February about its solvency amid mounting loan losses and other problems.

The thrift lost $22 million in the fourth quarter of last year.

In February, according to industry publications, Superior sold off $400 million in loans a day after the credit-rating agency Fitch Inc. lowered its rating on the thrift’s long-term debt to below investment grade.